Target's Tony Fisher addresses Canada-U.S. price gap

TORONTO • Target Canada president Tony Fisher addressed Tuesday the sticker shock gripping some consumers who expected the retailer’s prices would be on par with its U.S. stores when it opened outlets across the country this month.

The hot-button issue of Canada-vs-U.S. retail pricing was the subject of a Senate committee report this year and resurfaced in last week’s federal budget when the government announced it would drop tariffs on hockey gear and baby clothing.

Mr. Fisher told a Canadian Club of Toronto luncheon that Target, which has opened 20 stores in Ontario since the beginning of the month, knew it would have to open stores that would be competitive with other retailers operating in the Canadian market, whether they be U.S.- or Canadian-owned.

“We built this business model to be successful in Canada,” he said, which involved a detailed business analysis of what it takes to compete in the local marketplace alongside other large retailers — most notably, key U.S. rival Walmart.

There has been a lot of widely publicized discussion around why the retail prices are not on parity

“There has been a lot of widely publicized discussion around why the retail prices are not on parity,” Mr. Fisher said, which revealed multiple labyrinthine industry factors. Last year, a BMO study estimated Canadian retail prices are roughly 14% higher than in the U.S.

“Transportation costs are higher, distribution costs are higher, fuel costs are higher, wage rates vary across the country, the tax rates are different, cost of goods are different, the duties — I think the scale we have here in Canada is quite different from the incredibly different, densely populated U.S. marketplace,” he said.

Related

Mr. Fisher reiterated a promise of offering “highly competitive” prices here and said he is not deterred by the notion of consumers who still want to cross the border to shop at Target in the U.S.

“I still work for Target,” he said. “We are not trying to compete with ourselves ­— we want to come in and compete with the retail landscape here.”

Four more Ontario stores will open on Thursday, and the company’s “grand opening” date, when its first deal-driven flyers go out to Ontario consumers, is April 5.

Despite some consumer gripes in social media, the company’s out-of-the-gate success in its initial three “soft openings” — intended to test the retailer’s brand new systems and generally offer shy of a full inventory assortment — saw Target swamped with overly high demand. It “was a good problem to have,” Mr. Fisher said, adding it was hard to keep inventory on the shelves given the high sales volume. “We knew from the beginning we were not going to be perfect immediately.”

We want to come in and compete with the retail landscape here

Another measure of early success is evident in its loyalty program: Mr. Fisher revealed Tuesday that 44,000 Canadians had signed up for its Red Card, which offers a blanket 5% discount at the checkout counter, since it began offering the option online in February. Some 30,000 Canadians had U.S. Red Cards long before Target opened here, but they do not work in Canada.

Mr. Fisher said moving from Minnesota last year to a Toronto suburb as a consumer who needed to furnish his house and buy his kids sporting goods provided him with a good education about the retail scene in Canada.

“There just isn’t the same breadth of options from a one-stop shopping experience,” compared with the U.S., he said. “I’d find myself going to a lot of different retailers, and it helped me learn the competitive landscape, but it also helped me learn about where we could fit in to this marketplace.”